FanPost

Grading Myself: The Stan Kroenke Business Model

Well, I have spoke at length, mostly in angry posts directed at Bob, that I believe there is a financial and business model running the Avalanche and money will be spent.  I do not believe Kroenke is just some cheap owner wanting marginal profits from a cap floor hugging team.

 

I wrote a fan post in March but evidently never posted it. I tried to set up a blog like Jibbles but, when I named it “See Six Whores”, I was shut down by the FCC.* So, I gave up on that plan. 

 

I have always been obfuscated by the claim that Kroenke is content with paltry profits (if he even gets a profit) from a low salaried Avs team. So in my original fan post, I explained why I think Kroenke would spend money and I debunked the other arguments about how cheap he is. Instead of rehashing, I'll summarize my point.  Kroenke is a very shrewd investor and a billionaire; money made from incredibly smart investments buffeted by his wife's fortune which, according to Forbes, has not been used in his investments. He made money on shopping malls during a relatively dead real estate time and sold most of it off before the bubble two years ago.

He bought the Avs for 450 million in 2000 and based on normal estimates recouped all of that by the lock out. He did not buy the Avs to make a marginal profit, he bought the Avs to turn a huge profit like all his other investments. He bought the team in the midst of a potential dynasty and that dynasty ended 4 years later. He may have recouped losses but his investment was not as profitable as it could have been. It was not as profitable because the Avs had to spend and trade to win which hurt the future and once that lack of a future reared its ugly head, in 07/08, his profits from ticket sales plummeted.   

 

I went on EDGAR and I compared Kroenke’s real estate investments to the Avs (as an investment only); here, I saw a stark similarity. He developed real estate to eventually gain huge profits as most investors do. But he would cut loose investments early that did not turn large profits and would design business plans to ensure good investments paid off immensely.  I believe this business model is being applied to the Avs (the hockey details having been adjusted) and I predicted five things to happen this summer based upon this business model: 

1)    The Avs would spend money on a goalie.

2)    The Avs would spend some money on Free Agents.

3)    The Avs would adjust for their weak defense.

4)    The Avs would begin to rearrange the team make up to show a larger core (outside of Duchene) for the future.

5)    The Avs would be a few million over the cap floor.

 

How did I do?

 

1)    They sure addressed it, but instead of spending on Vokoun they traded for their future goalie. This move both potentially fixes the goalie issue and expands the core of the team. Giguere shows a desire to address needs on a deeper level as well. 

2)    I actually predicted money would be spend on a forward, but Sherman addressed his defense first. Hejda, and now O’Brien, are free agents who add talent and depth. Kobasew is a wild card. I was expecting someone like Dumont, but Kobasew still adds some scoring and veteran presence. It’s not a brilliant signing but it shows a desire to spend money to plug holes.

3)    Well they sure as hell did this. Not only did the defense go on steroids but they are tougher, meaner, and the Avs’ goals against per game should drop.

4)    We now see the future is Duchene, Stastny, O’Reilly, Johnson, Varly, Landeskog, and the 700 defensive prospects. I am sure experts will tell us Johnson is a bust and Varly is a walking wheel chair but it sure looks good going ahead.

5)    Yeah, I would be right but for Liles’ contract. I never saw that happening but it not only makes sense to get the defense bigger, but it allows Typhan Barriot to find a spot on the team which speaks to adjusting the team to design a core going forward. I will admit there may be a sense of “well we can probably save some money this year if we do this” to the Liles trade, but that is a specific instance, not a team wide plan.

 

 

There is the argument Kroenke could have spent more money and made a better team for 2011-2012. However, money will be spent next summer: A LOT of money. Spending a lot of money this summer could have hurt the team in the future but that is a separate argument. These moves and signings show an orchestrated and detailed plan that revolves around a core group of players. It took trades and drafting to build the core and now Sherman began to spend some money (not a ton, but some) on players to plug holes. This is how teams should be made in my opinion and when this team needs to add a Patrick Sharp-type player in Free Agency, I think it is clear they have shown they will.

Kroenke and Sherman spent money this summer on Free Agents, addressed most of the weaknesses (winger depth is still an issue), and showed that we should have faith in the management. Sherman has a plan to make this team compete for the Cup and Kroenke has a business model in place to profit off of that. It is not about him being cheap; it is about the team being successful because a good Avalanche team means a good return for Kroenke. Even if Kroenke is some greedy Scrooge McDuck, it should not matter because his "greed" will produce a great team for us to watch for a long time.

 

* DISCLAIMER: I did not actually set up a blog. Only losers and Red Wings fans do that. The cool kids just post in the comment sections of other people’s blogs.

MileHighHockey.com is a fan community, allowing members to post their own thoughts and opinions on the Colorado Avalanche and hockey in general. These views and thoughts may not be shared by the editors of MileHighHockey.com.

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